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Consumer confidence, spending intentions, hurricanes

The UoM consumer confidence index for September fell to 95.3 from 96.8 in August and was about in line with the estimate of 95. The components were very mixed as Current Conditions rose 3 pts to the best since November 2000 while Expectations were down by 4.3 pts after jumping by 7.2 pts in August. Looking within saw those expecting Higher Income rose 1 pt after falling by 4 pts last month. Those expecting Lower Income was down by 3 pts after rising by the same amount in August. Business expectations were little changed as were employment expectations.

With respect to spending intentions, they were mixed as well. Those that plan to buy a home fell 2 pts to the weakest level since a one month drop in August 2011 and you have to go to 2009 before then. Those that said it’s a good time to sell a house rose by 6 pts to match the highest level since August 2005. I’ve said many times, buyers are pushing back against record high home prices and its now month after month that we are seeing evidence of that. This itself is impacting the pace of transactions as seen in the recent housing data. I mean 5-6% per annum price increases is just not sustainable when overall inflation is running no more than 2%. Low mortgage rates are a nice offset but the down payment needed keeps going higher. Anyway, those that plan to buy a car/SUV fell 3 pts to a 4 month low and that is just one point from matching a 3 yr low. Yes, we’ve seen the peak in autos this cycle (notwithstanding an expected bump related to the aftermath of the hurricanes). Buying intentions did improve by 6 pts from those wanting to buy a ‘major household item’ and is back to where it was 4 months ago.

Likely in response to the rise in gasoline prices (which is something the average consumer sees the price of just about every day), one year inflation expectations rose one tenth to 2.7%, matching the highest level since April 2016.

Lastly, this is how the UoM broke down the impact of the hurricane: “Across all interviews in early September, 9% spontaneously mentioned concerns that Harvey, Irma, or both, would have a negative impact on the overall economy. Among those who mentioned the hurricanes, the Sentiment Index was 80.2, while among those who did not spontaneously mention either hurricane, the Sentiment Index remained unchanged from last month at 96.8.”

Bottom line, outside of the post election spike in confidence, this UoM index has essentially flatlined since early 2015. See chart going back to 1999. Either way, confidence figures like this are never market moving because it only does us where we are, not where we are going.